Introduction: BLM is not only a strategic planning tool, but also a set of thinking framework for analyzing and solving strategic problems.
1. Why develop a business strategy
"Soldiers, the major affairs of the country, the place of death and life, and the way of survival, must not be overlooked." In the same way, the strategy of an enterprise is a matter of life and death for the enterprise, and it has to be carefully analyzed and carefully decided. At the same time, "the winner wins first and then seeks to fight, and the loser fights first and then wins", do not cover up strategic laziness with tactical diligence.
1: Three levels of corporate strategy
Strategy is hierarchical, and the strategy of an enterprise can be divided into three levels from top to bottom: overall strategy, business strategy and functional strategy. This is shown in Figure 0-1.
The overall strategy focuses on the vision, mission and goals at the corporate level, as well as the businesses and portfolios that need to be invested in order to achieve these visions and goals, and the enterprise-wide strategic initiatives and development strategies developed for the development of these businesses.
Business strategy refers to the business development strategy formulated by each product line, business division, subsidiary or region within the enterprise, and the product line, business division or subsidiary is a business unit of the enterprise, and it is also the profit center that is truly responsible for the business results end-to-end within the enterprise. Business strategy focuses on which target markets to develop, how to achieve growth, and what measures to take to promote growth.
The bottom layer is the functional strategy to be formulated in each functional area, including human resources strategy, technology research and development strategy, marketing strategy, etc. Needless to say, the low-level strategy is developed to support the achievement of the strategic goals and tasks of the upper level. Therefore, the process of formulating a business strategy also includes the process of decoding the overall strategy of the company.
For small and medium-sized enterprises, the concept and method of strategy formulation and strategic management are very different from those of global enterprises like Huawei, and the formulation of the overall strategy is mainly based on the strategic intentions of the business boss and several capable executives, and points out the future business development direction, business focus, and overall guidelines and policies to the business operation team. For an enterprise with an annual revenue of less than one billion yuan or even only tens of millions of yuan, the grasp of the overall strategy can only rely on the boss and a few executives. Insight into future trends and judgment of opportunities, even against public opinion. Making strategic trade-offs is not something that can be done better by adding a few more middle and senior executives, and the disturbing quarrels that start from the protection of their own local interests will make the overall strategy different. This is completely different from the business strategy that requires marketing, R&D, production, quality, finance, etc. to participate in the planning process, because the business strategy is the decoding of the overall strategy and the process of reaching a strategic consensus.
The formulation of the strategy requires a lot of time and energy, for small and medium-sized enterprises, generally only need to make the overall strategy and business strategy, the focus of each functional area is to do a good job in the annual support plan, there is no need to formulate a medium and long-term human resources strategy, technology research and development strategy and other functional strategies.
2: How to define a business and business unit
How do you define a business? We generally define it in three dimensions: Who are our customers? What are the needs of the customer? How do we meet the needs of our customers? For example, we think of coach traffic as a business, and low- and middle-income people are our customers, and their needs are to get from A to B at a lower cost, and the way to do this is by car. If we look at long-distance passenger transportation as a business, it will also include train passenger transportation and air passenger transportation, and the customers of air passenger transportation are middle and high-income people, their needs are speed and comfort, and the way to achieve it is airplanes, and the three dimensions are very different from long-distance bus passenger transportation. Therefore, long-distance buses, trains, and air passenger transportation should be managed as three services, otherwise, treating them as one business and handing them over to an independent business unit for unified management will bring great challenges and confusion in the allocation and management of resources.
Many times, we can use "industry" to divide the business, and rarely a business is cross-industry, for example, long-distance bus passenger transport, train passenger transport, and air passenger transport are three different industries. Of course, the division of business has a lot to do with the company's own definition and interpretation of the business, we can regard the home appliance business as an independent business, and it can also be subdivided into two sub-businesses - white electricity business and black electricity business.
A business unit is the smallest business unit that can independently provide products or solutions belonging to a certain industry for a specific market segment, and the common business units include product lines, business divisions, and subsidiaries, and business strategies are generally formulated by these business units.
3: Why you need to develop a business strategy
In order to implement the overall strategy of the enterprise, it is necessary to ensure that the "top and bottom have the same desire, and the left and right alignment" within the enterprise must be decoded through strategic decoding. Many organizations directly decode the key tasks and KPIs (Key Performance Indicators) output from the company's overall strategic plan to each function "vertically" through two tools, the strategy map and the balanced scorecard, as shown in Figure 0-2. This method is claimed to ensure the vertical consistency, horizontal consistency, and balance of the four dimensions of the balanced scorecard of the decoding results. In this way, the operation has indeed achieved that everyone picks up the heavy burden and everyone has indicators on their shoulders. One of the basic assumptions of this strategy decoding approach is that every department in the organization can achieve the ultimate strategic goal if the organization does it well, and this basic assumption is based on a cognitive model that applies the law of addition to the operation of the enterprise.
In fact, the effective operation of the enterprise depends on the cooperation and cooperation between various work and departments, where there is an interdependent relationship between the links, the output of its overall performance depends on the worst performance of a few links in the system, that is, the bottleneck in the system, rather than the sum of the performance of all links, which is the basic assumption of the bottleneck theory. In other words, the operation of the enterprise is governed by the law of multiplication rather than the law of addition. The resources of the enterprise are limited, and the attention of the management has become a scarce resource in the era of excessive competition, which requires us to reach a strategic consensus of "left and right alignment" in the process of strategic planning and implementation, and then focus resources and attention on several battles that must be won and several shortcomings that must be filled, rather than "peppering" resources and management attention and engaging in so-called "balance".
Only under the guiding ideology of focusing on bottlenecks, can we discuss how to make the overall strategy of the enterprise achieve the same desire and alignment from left to right through strategic decoding, which is of practical significance.
With the traditional overall strategy decoding method, it is easy to achieve the same desire between the top and bottom, but it is difficult to align the left and right. In reality, the approach is to first use the strategy map to describe the overall strategy in the four dimensions of the balanced scorecard, carry out strategy clarification, and then analyze the KPIs and key tasks to be undertaken by each department from the perspective of business processes from the perspective of internal operations, including Huawei's IPD, LTC (Leads To Cash), and ITR (Issue To Resolved). Although this process also has the joint participation and heated discussion of various functional departments, in practice, we found that in the absence of a unified business strategy and specific play consensus from the BU level, only from the perspective of process and department responsibility positioning to decompose the KPI and key work of each department, on the surface it seems that each department has tasks, and there are KPI indicators to pull them, but from the overall perspective of the system, there is still a lack of strategic consistency between departments, and it is impossible to reach a strategic consensus of "left and right alignment". This is what Porter called "strategic worthiness".
In fact, developing a business strategy for each BU is a first-level strategic decoding of the overall strategy. The goal of the business strategy is mainly derived from the decomposition of the overall strategic objectives, the business strategy will subdivide the market, and design the business model (business model) for different market segments, and design different business strategies and business plans from the perspectives of R&D, manufacturing, marketing, and service under different business models, and output product roadmap planning at the same time. This is a fuller and more thorough clarification of the overall strategy, and a process of co-creating strategic consensus among the various functional departments related to the business.
After all, a strategy map is just a strategy description tool, based on Kaplan's famous assertion that if you can't describe, then you can't measure; If you can't measure, then you can't manage. Why describe the strategy? Because the overall strategy of the enterprise is generally formulated by the top management, before decoding it into the work tasks of the middle and grassroots level, it is necessary for the middle and grassroots managers to understand the overall strategy of the enterprise. In fact, in addition to strategy maps, Dr. Goldratt, who pioneered the bottleneck theory, has also developed a tool called "strategy and tactics trees", but it is not as common as strategy maps. The business strategy itself is a fuller and more thorough description of the overall strategy of the enterprise, the strategy map describes the skeleton of the overall strategy, and the business strategy enriches the flesh and blood for the overall strategy.
After the first layer of decoding of the overall strategy through the business strategy, the next step is the decoding of the business strategy itself, which is the second layer of decoding, that is, the decoding of the spatial dimension. Through the second layer of decoding, the business strategy and business model are decoded into the business strategies of each functional area, such as product development strategy, pricing strategy, channel strategy, and marketing and communication strategy, and from these strategies, the winning battle of each BU in the next three years and the organizational capacity improvement plan supporting winning the winning battle are derived. The next third layer of decoding, that is, the decoding of the time dimension, extracts the key tasks for the next year from the three-year strategic winning battle and organizational capacity improvement plan, and derives the annual performance KPIs of each BU. The fourth layer of decoding is to break down the annual key tasks and performance KPIs of each BU into the various functions. Under normal circumstances, in the process of strategy formulation, we only need to achieve the third level of decoding, and the fourth level of decoding is the decomposition of the performance goals of lower-level departments and individuals, which we classify as the category of human resource performance management.
Practice has proved that only through the strategy map and the balanced scorecard to directly decompose the overall strategy into the key work and KPI indicators of each functional department, can not meet the requirements of strategic consistency, can not form an end-to-end "left and right alignment" strategic consensus, and also loses the strategic consensus can give the grassroots executive departments a huge internal driving force, the effect of strategy implementation is greatly reduced. If the business strategy is designed and decoded, it can make up for the above shortcomings.
4: The relationship between SP and BP at each level of strategy
The strategy of the enterprise is divided into three levels, and the strategy of each level can be divided into SP (Strategy Plan) and BP (Annual Business Plan), whether SP or BP, they are a Plan in English, called a plan, but the length of time of the plan is different. SP focuses on the medium and long-term development plan of more than three years, BP refers to the annual business plan, SP guides and guides BP, BP is the strategic development of SP, and the SP is strategically decoded to obtain the key tasks (key tasks) and organization-level KPIs of BP in the next year, and BP then drives the preparation of the annual budget. Within Huawei, SP is also called the Spring Plan, and BP is also called the Autumn Plan.
Generally speaking, the process of formulating an SP is a "V" shaped process, in which the SP planning project is initiated by the president's office or the highest management decision-making body, and the future strategic direction and business portfolio relationship are clarified with the help of the strategic planning team at the company level and each BU. Each BU formulates its own SP with the assistance of a company-level planning team based on the company-level strategic direction and business unit positioning, and is subject to strategic questions from the highest management decision-making body. On the basis of the SP of each BU, the company-level planning team considers cross-BU collaboration and resource conflicts, integrates to form a company-level SP, and submits it to the highest management decision-making body for approval. This is a top-down process of direction guidance and target decomposition, and then bottom-up integration and optimization, which is a "V" shaped process. The BP development process is similar, and the combination of SP and BP's processes is a "W" process.
2. Strategic Management System DSTE
Strategic management includes strategy design, strategy decoding, and strategy execution, and Huawei manages them through a first-level process called Develop Strategy To Execution (DSTE). The whole management process is divided into four steps: strategy formulation, strategy development, strategy implementation and monitoring, and strategy evaluation. Through these four steps, the strategy is managed in a closed loop and iterated annually, as shown in Figure 0-3.
The first step is strategy development, which outputs the medium to long-term SP, and for the business strategy, the tool used is BLM. The second step is strategy development, decoding the SP, and formulating a BP, for the decoding of business strategy, the tools used are not only BLM, but also BEM (Business Strategy Execution Model). The third step is strategy execution and monitoring, which is the process of business operation and management. The final step is a strategic review and performance review.
Specific to the management of business strategy, the composition and specific responsibilities of its planning team are as follows:
1: Composition of the business strategic planning team
Leader or Owner: BU General Manager/Business Unit President.
Members: Market Representatives, Market Research Personnel, Sales Representatives, System Engineers, Development Representatives, Manufacturing Representatives, Technical Support Representatives, Financial Representatives, Human Resources Representatives, Quality Representatives, etc.
Therefore, the leader or owner of this planning team is the general manager or business unit president of BU, and forms a planning team with planning representatives from various functional areas, such as marketing representatives, development representatives, manufacturing representatives, and financial representatives.
2: Responsibilities of each key role in the business strategic planning team
◆ Marketing Representatives, Sales Representatives:
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Collect industry and market trend information and conduct preliminary analysis to identify opportunities.
Provide analysis of the market performance and product competitiveness of major competitors in the industry, and propose competitive strategies.
- Collect and analyze the main pain points and needs of customers in the future, and the main factors that affect customer purchase behavior.
- Provide data and information analysis reports on the competitive performance of the company's products in the market, customer satisfaction, etc.
- Propose competitive marketing strategies, product features, and signposts.
◆ System Engineer and Development Representative:
- Provide an analysis report on the technical competitiveness of the main products of competitors.
- Analysis of competitors' R&D status and advantages.
- Analysis of the shortcomings of the company's R&D and technology development.
- Formulate a plan to improve technology and R&D capabilities.
◆ Manufacturing Representative, Technical Support Representative:
- Collect and analyze the main competitive advantages of competitors in the supply chain of process, manufacturing, procurement, etc.
- Provide customers with information on after-sales support, product experience, satisfaction, etc.
- We provide analysis reports on the quality of our main product DFX (Design For X) and product quality.
◆ Financial Representative:
- Financial analysis that supports strategic planning for the business.
- Provide information on the financial costs of the BU and assist in the development of business plans.
With the planning team in place, let's look at the timeline. Huawei's strategic planning is done throughout the year, from April to September every year, SP, also known as spring planning; BP is done from October to February of the following year, also known as the autumn program. For small and medium-sized enterprises, this time cost is too high. Based on years of practical experience, the author believes that it is feasible for SMEs to reduce the time of strategic planning projects by half, completing SP from September to November every year, BP from November to January, and communicating and implementing annual key tasks and performance goals in February. This is shown in Figure 0-4.
In the process of developing SP and BP, there is a form of strategy discussion that is worth learning from, and that is the strategy workshop. The specific operation process of the strategy workshop can be divided into three stages: brainstorming before the meeting, full discussion during the meeting, and sorting out and publishing after the meeting. Before the meeting, the issues and materials to be discussed are categorized according to the theme of the strategic discussion, sent to the participants and feedback is collected. During the discussion during the meeting, it is necessary to do a good job of guiding the rhythm, not only to fully discuss it, but also to converge in time. There are a lot of documents that are out of the workshop as a whole, but they are not the most important because they are rarely looked at seriously in the rest of the day. The most important output of the seminar is the strategic consensus of "left-right alignment" reached through full discussion and collision of views. These consensuses provide a basis for the consistency of business strategy design and organizational support capabilities, and also provide a strong internal driving force for subsequent strategy implementation.
3. The 7-step approach to business strategic planning
"I am fortunate to know Qing's peach blossom noodles, and from now on there will be a warm spring." This is CCTV's praise for Japanese figure skater Hanyu Yuzuru, and also the author's praise for BLM, a strategic planning tool. During my tenure at Huawei, I used BLM to successfully complete business transformation and analyze and solve many strategic business challenges. Since entering the field of IPD consulting, the consulting methodology used is also derived from BLM's framework of thinking. The BLM business leadership model is shown in Figure 0-5.
BLM guides the business management team to conduct systematic thinking, pragmatic analysis, effective resource allocation and execution tracking in the process of strategy formulation and execution from various aspects such as gap analysis, market insight, strategic intent, innovation focus, business design, mission-critical dependencies, formal organization, talent, climate and culture, and leadership and values.
The BLM business leadership model is divided into five main parts:
- The whole model is like a trolley box, and the handle of the trolley box is the gap, and grasping the gap also raises the whole strategic planning process.
- The gap is divided into performance gaps and opportunity gaps, and to close the performance gap, strategy execution must be strengthened starting with key tasks, climate and culture, talent and formal organization.
- To close the opportunity gap, there must be a new business design, which is the foothold of the strategic design, and the input to the business design is the market opportunity derived from market insights.
- Not all the dishes in the vegetable market are the dishes in your basket, strategy is choice, and the highest standard of screening is strategic intent.
- Business design requires innovative thinking, and it is an innovation that focuses on the main channel of business, and the types of innovation include product and technology innovation, internal operation innovation, and business model innovation. Today's era is already an era of competing business models.
- At the top of the model is leadership, leadership is fundamental, and the design and execution of the strategy must be led by the top management. The process of developing senior leadership is to lead the business management team to gain insight into strategic issues and opportunities, and accordingly design the business, drive the execution of the strategy to achieve the strategic goals, and then enhance its own impact.
- The values at the bottom of the model are the foundation, and as the top leadership of the business, it is important to ensure that the company's values are reflected in the strategy, that the values are the basic guidelines for decision-making and action, and that managers at all levels also ensure that the company's values are part of the day-to-day implementation.
- The connection from strategy to execution is strategy decoding, and to implement the strategy, there must be strong execution and organizational support (including formal organization, talent, atmosphere and culture) as a guarantee, otherwise, no matter how good the strategy is, it will fail; However, implementation is not empty talk, implementation needs specific strategic objectives as a traction, and requires specific business design and business strategy as the content of implementation.
The gap is the problem, because the problem is the gap between the desired state and the status quo, which shows that BLM provides a unified thinking framework for the discussion of SP, BP, and strategic key issues.
1: Historical background of Huawei's introduction of BLM
BLM originated from IBM, and was originally introduced into Huawei by Huawei's sales and service system as a leadership model rather than a strategic planning tool, with the purpose of improving the leadership of middle and senior managers, so its original Chinese translation was "business leadership model", rather than later "business leadership model". As one of the first pilots of the Business & Software product line and the Indonesia Representative Office to turn BLM into a strategic planning tool, the author and other business leaders who tried the tool reached a consensus from the beginning on the scope of the tool: it can only be applied to a product line, BMT, SPDT, PDT or a market segment to develop a business strategic plan in this field with business model design as the core and product portfolio and product roadmap planning as the main line.
Prior to the introduction of BLM, our business leaders used the MM (Marketing Manage) tool in IPD to develop their business strategies. So, when we first transformed BLM from a leadership model to a strategic planning tool, we incorporated a lot of MM planning ideas, practical tools, and methods. The MM strategic planning model is shown in Figure 0-6.
Based on the above background, BLM is a simple and easy-to-understand BLM that integrates process-oriented, modular, and detailed MM, and we know that in the practical application of BLM, a large number of BLM users, especially those business executives who are not familiar with MM, will encounter many pitfalls in the process of formulating business strategies. For example, when doing a gap analysis, should I directly analyze the root cause of the gap? If you want to do root cause analysis, do you still use the 5WHY method? For example, the "Execution" part on the right side of BLM: Key Tasks, Formal Organizations and Talents, from the perspective of time, should focus on the ability to ensure the strategic execution in the next three years, so how to transform the "Execution" part into an annual business plan (BP)? All of these pitfalls can make the business strategy development process difficult. If the business strategy is not logically self-consistent, how can you convince the top management that your business strategy is feasible? Therefore, we later colloquially referred to BLM as "don't mess around", also to remind BLM users.
2: Why replace MM with BLM as a strategic planning tool
One of the main intentions is to realize that this is not the era of product competition, but the era of business model competition. I remember that when I was managing the RBT business at Huawei, I had already tasted the sweetness of business model innovation. For example, in Nigeria, we have cooperated with multinational operators MTN, 55 percent, promoted the Hosting model for small countries and operators with limited financial resources, and engaged in ISV cooperation with local outsourcing companies for on-site customized development, all of which have won the global NO.1 market share for CRBT products, with an average gross profit of 86% (2008 data) providing a strong competitive advantage, which is not easily imitated by competitors. However, the innovation of simple product functional characteristics can be quickly imitated by competitors.
What motivates us to shift from focusing on product features to business model innovation? Of course, there is an assessment pressure of no less than 30% revenue growth per year, and there is another reason, that is, Mr. Ren said to the CRBT team known as the sharp knife product: whether your CRBT product is a successful product or not, don't jump to conclusions too early.
Listening to this sentence, we were very shocked, and deeply reflected, so we realized a big problem, take China Mobile's music base in Chengdu as an example (at that time, China Mobile had seven different games, mobile phone reading and other bases in the country), only in this one base, its annual income is 16 billion yuan, and we only have 45 million yuan, at that time we were complacent that we only sent a project manager on site, with more than 20 outsourcing personnel, earning 45 million yuan a year is already a lot. However, compared to China Mobile's 16 billion yuan, what is the amount of money earned? Why? It's because we don't have the qualifications to operate and can't operate ourselves. What to do? Then we will cooperate with customers to operate, so we have a cooperative operation in Nigeria. This is the first successful business model innovation, and the product and technology have not been innovated in any way.
After realizing the role of business model innovation, when we use MM for strategic planning, we find that MM still focuses on the field of product innovation, but when thinking about business strategy and planning, we should consider the design of business model from the aspects of business development path (Ansoff matrix), new technology adoption curve (TLC), profit zone and profit model, etc., the basic theory is Mercer Consulting's VDBD (Value Driven Business Design). However, we believe that this is not enough, and the core of business strategic planning should be shifted from focusing on product innovation to focusing on business model, that is, business model innovation. So when we first came into contact with BLM, we decided that it would be the planning tool for the future. However, we did not completely abandon MM, because BLM was too rough and not practical and instructive, so we had the initiative of dismantling BLM into eight pieces and kneading MM processes, tools, and templates into BLM, forming a 7-step method for BLM business strategic planning.
Therefore, in summary, the BLM strategic planning method is "BLM (Service Leadership Model) + IPD-MM Strategic Planning Methodology + Huawei Strategic Planning Practice".
3: Not all strategic planning can be done with BLM
Any tool and methodology has its own boundaries, and BLM has also tended to be abused as the enthusiasm for learning from Huawei has continued to rise in recent years.
The core of BLM business strategic planning is business model innovation design (or business model design), including customer selection, value proposition, profit model and strategic control. The business model or business model must be specific to a market segment or business unit, not to the market as a whole or the company as a whole. We don't say what a company's business model is, only what a business, a product, or a market segment is. The process of customer selection in the business model is to first segment the market, evaluate the market segment, and then determine the final target market segment, that is, the target segment customer group. The value proposition reflects the value proposition of the product, what problems to solve the customer, what problems are not willing to solve the customer, these can only be for a certain market segment, can not be general for the entire market. The profit model and strategic control can only be aimed at a certain market segment, because in different market segments, enterprises will face different customer groups, different competitors, and different market environments, so the profit model and competitive strategy must be different.
The overall strategy is planned at the granularity of the business, and the business strategy is planned at the granularity of the market segment. As a result, BLM tools are strong in business strategic planning, not overall strategic planning. Not all strategic planning can be done with BLM.
4: Summary of the 7-step approach to business strategic planning
The 7-step approach used in this book is different from the original business leadership model, the biggest difference is that the new model adds a module: business strategy and planning. Because business design is the output of the strategic level, and the organization and talent that support the implementation of the strategy are the requirements of the tactical level, from strategy to tactics, the middle must go through the refinement of strategy, including R&D strategy, procurement strategy, production strategy, marketing strategy, etc. In this way, the entire strategic planning process is a process of gradual refinement from strategy to strategy to tactics. Without the development of a business strategy and business plan, in the vast majority of cases, strategy is disconnected from tactics, that is, such a strategy is not executable. The 7-step approach to business strategic planning is shown in Figure 0-7.
Let's take a look at the tasks and main outputs of each of the 7 steps of BLM business strategic planning.
Double-Difference Analysis (STEP1): Strategic planning starts with gap analysis, and only when there is a gap can there be motivation, that is, the so-called creative tension is used to fill the gap. The gap is divided into the performance gap and the opportunity gap, the performance gap is to look at the past, and the opportunity gap is to look at the future. Closing the performance gap requires enhanced strategy execution, while closing the opportunity gap requires the design of new business models. As no formal market insights have been conducted, the focus of Step 1 is to identify performance gaps, starting with the financial and market performance of the business unit.
Vision, Mission, and Goals (STEP2): The opportunity gap arises from the business operations team's expectations for the future strategic direction and goals, i.e., strategic intent, which is what is designed in Step 2. Strategic intent includes vision, mission, and goals. The vision should answer what business to do, how to do it, and what it wants to become; The mission answers what value to create for customers, enterprises and employees; Objectives include financial goals, market goals, technology goals, etc.
Market Insight & Analysis (STEP3): Step 3 focuses on the "four looks" of market insight, i.e., looking at trends, customers, competitors, and yourself. The first three looks are to look at the external environment, and the last "look at yourself" is to turn the perspective to the internal enterprise. Looking at the trend includes looking at the macro trend and the industry trend (meso), and looking at the customer, the opponent, and the self is the micro behavior. To put it bluntly, "market insight" is to find the intersection of what can be done (there are market opportunities), what you want to do (business vision) and what you can do (internal capabilities) to provide input for the design of the next business model and business strategy.
Business Innovation Design (STEP4): The innovation design of business model is the foothold of strategic design and the core of the entire strategic planning. The design of the business model requires systematic thinking about the five elements of customer choice, value proposition, profit model, business scope, and strategic control, and their interrelationships. The business model, also known as the business model, reflects the basic logic of the daily operation of the business, and the difference in the business model will bring about the difference in the business operation system and management model. In this step, the strategic planning team begins to segment and evaluate the market, select the final target market segments, then design the business for each target segment, and finally integrate the business model. A good or bad business strategy depends on the business model. How to judge the quality of the business model? The first principles of strategy are used: strategy is about building the ability to create customer value (market success), business value (financial success), and sustainability (sustained success).
Business Strategy and Plan (STEP5): Business model is a strategic thing, and strategy needs to be transformed into a strategy, and then refined into tactics to achieve victory on the battlefield. The business plan consists of six elements: product packages, distribution channels, order fulfillment, pricing/terms of service, technical support, and marketing communications. Similar to business design, at the beginning, the strategic planning team should formulate detailed business strategies and plans for each target market segment, and output the product roadmap plan for each market segment, and then integrate the business strategy and product roadmap planning of all market segments into the overall business plan and product roadmap plan of the business unit, and at the same time output the list of human resources and key technologies required by the business unit as input for subsequent technology and human resource planning.
Mission-critical and organizational support (STEP6 and STEP7): In these two steps, we need to use a tool called BEM (Business Strategy Execution Model) to strategically decode the business strategy. The core of strategy decoding is to sort out the major strategic initiatives that are decisive for the achievement of strategic goals from many business strategies, that is, the 3~5 must-win battles that must be won in the next three years, and then derive the strategic KPIs from the key success factors of the must-win battles. At the same time, it is also necessary to analyze what obvious shortcomings exist in organizational capabilities in order to win the battle, and what are the root causes and solutions of the shortcomings (including business leadership, organizational processes, talent and incentives, and atmosphere and culture).
At this point, we have only completed the decoding of the spatial dimension of business strategy. Finally, we need to distill the key tasks for the next year from the three-year strategic must-win and organizational enablement plan (and possibly the organizational change plan), and derive the annual organizational-level KPIs (Level 1 KPIs) for the business unit from the strategic KPIs and annual key tasks mentioned above. In this way, we have completed the decoding of the time dimension of the business strategy. Finally, an annual business plan and budget are developed based on annual key tasks and organization-level KPIs.
It should be emphasized that although the 7-step method of strategic planning divides the whole process into 7 steps, however, in the actual process, there is no strict sequence between the first three steps, and in practice, you can also do market insight first, and then do double-difference analysis and strategic intent design, which only requires that the output of these three steps should be relatively clear before doing business design (step 4).
5: Wrong direction in developing a business strategy
In the process of consulting on business strategy, the author found that enterprises often make a directional mistake. There are two directions of thinking for business strategic planning, one is market-oriented, customer-based planning ideas, which are from the outside in and are taken for granted. In practice, we often see that the starting point of the strategy planned by the business operation team is based on its own existing resources and competitive advantages, and this direction is from the inside out.
The first question to think about strategy from the inside out is: What do I do? The next step is to think about what products and solutions I can offer, what channels and partners I can leverage, and then what customers my products and channels can meet.
Instead, the first question of thinking about strategy from the outside in is: Who are our customers or what do customers need? Starting from the needs of customers and customers, we will think about what products and channels we want to develop to meet customers, what resources and core competitiveness are required for business activities, and how to make up for the lack of resources and competitiveness.
Based on strategic thinking from the inside out, Kodak thought that it was making film, and finally went bankrupt; Based on strategic thinking from the outside in, Fujifilm, which also makes film, found that there was still an unmet need from customers in the cosmetics and medical industries, and Fujifilm successfully transformed its business. Inside-out strategic thinking is highly hidden, and the planning team also does market insights and analysis of customer needs, but the conclusion of the analysis is which customer needs can be met with our resources and capabilities, rather than which customer needs should be met (can and want to do).
Of course, the author does not advocate a false and empty strategic nothingness that is divorced from its own resources and capabilities, business strategy is a development strategy, and we should think about strategic choices from the perspective of development. This book advocates formulating strategies based on core competitiveness, according to the outside-in strategic thinking, and then looking at the present from the future, and thinking about how to make up for the shortcomings of resources and capabilities in order to achieve the strategy, and make the right strategic choices at the intersection of "what can be done", "what can be done" and "what you want to do".
Author: Fan Hui
Source: Business Growth Strategy: The 7-Step BLM Strategic Planning Approach